Testimonials

The Global Map for Manufacturing is Being Re-Drawn - Yet Again

By Karen M. ReddingtonPresident, FedEx Asia Pacific

The difference in today’s revolutionary shift in manufacturing isn't a matter of geography, nor is it a competition between countries or continents.

Next-shoring – not moving manufacturing from one location to another, but “adapting to, and preparing for, the changing nature of manufacturing everywhere” is the new frontier, as a recent McKinsey report says1.

It's a trend towards something much greater and far more complicated — a trend of shifting mindsets, of access to innovative manufacturing techniques, of thinking beyond the basic numbers and coming up with the most efficient supply chains.

In short, it's about how companies need to look at the big picture to make better business decisions. Because we transport by air, land and sea, FedEx bears witness to the global trends affecting all kinds of industries.

We've seen a growing trend in our own business towards the greater use of ocean as part of our shipment solutions, not just the air express we pioneered and are known for. We have witnessed underlying shifts in global wages, purchasing power and energy costs across the 220 countries and territories we operate in.

Within Asia, manufacturing is shifting to central and western China, to Vietnam, Malaysia and Indonesia. At the same time, China is no longer just a factory floor – it’s an innovation powerhouse that’s moved from the origin to the center of the supply chain.

For some industries, it can make more sense to keep production in emerging markets in Asia, rather than the U.S. or Mexico, so they are near the huge consumer markets of China and India.

Yet Canada and Mexico can still be seen as attractive options for manufacturing for the same reason — their closeness to the vast market that is the USA — and the accompanying advantages of the North American Free Trade Agreement (NAFTA).

But it's not a one size fits all. China might offer economies of scale and a large labor force, yet countries such as Mexico and the UK also offer the advantage of skilled labor in competitive sectors.

Innovative technology will also play a key role in the future of manufacturing, and where it's located. McKinsey cites the advance of 3D printing as an amazing way that companies could actually replace traditional suppliers of parts with targeted usage of in-house printers2.

Others are working on greater visibility of the best solution for manufacturers, and how to piece the complex global picture together. A software tool called the Cost Differential Frontier3 developed by the University of Lausanne and supported by the US Department of Commerce helps companies figure out the best place to locate by comparing labor, trade financing, regulatory compliance and shipping costs, as well as issues of oversight and political and security risks.

The days of simply assessing cheap versus expensive labor costs are long gone. For most companies, next-shoring won't be just one thing to consider, but many.

Modern manufacturers want variety and flexibility in their supply chains, which in turn require multiple and cost-efficient connections to the diverse, demanding and truly global customers now being served.